Starting immediately, the company
is eliminating performance bonuses and instead incorporating
previous bonus potential into each employee’s salary, Jenn
Hyman, Rent the Runway cofounder and CEO, told Business
Insider.

In effect, all 950 employees will
see a boost to their salary — though those who hit their bonus
thresholds won't necessarily have any more money in their pocket.
Hyman says the change is meant to underscore the company’s trust
in its employees and to streamline its efforts to scale the
business.

“We're saying we trust you as a team member, we trust your best
of intentions, we trust that you're working your butt off, and
sometimes, the work that you do is going to dramatically impact
our financials, and sometimes it won't,” she said. The important
thing, Hyman stressed, is that employees are given the resources
to grow at the same pace as the company, in terms of learning and
taking on new and additional responsibility.

Rent the Runway declined to specify how much the
compensation move would cost the company. The size of raise
employees will receive will vary depending on their previous
bonus potential, which was determined by level and tenure at the
company as well as performance and contribution.

The decision to end bonuses and
boost salaries came after repeated feedback from employees
who said the potential of a bonus was “a distraction from
learning,” according to Hyman. Employees tended to provide “100%
positive” feedback on their coworkers' performance
because they didn't want to affect a colleague's take-home
pay. The absence of constructive criticism ended up stunting
the growth of employees and the company as a whole, Hyman
said.

"The candidness was often missing, and therefore, we weren't
learning as much as we could've, which didn't allow us to scale
as much," Hyman told Business Insider.

Now, with bonus potential out of
the picture, Hyman hopes employees will shift their focus
from near-term compensation goals to "those big, hairy, audacious
goals that are going to impact the business," as well as begin
sharing candid feedback with management and colleagues.

After years of considering an
alternate compensation model, Hyman said it’s time to “forge new
territory based on the culture that we want to create at Rent the
Runway — which is a culture of learning.”

Though it’s a drastic change,
Hyman ensures they’re committed. “It's not an experiment, we're
going to make this compensation — giving everyone a raise —
fundamental to scaling the company.”

The compensation change comes
after a rocky 2015 in which
Fortune spoke with former employees and investors to
investigate the
“exodus” at Rent the Runway of several top-level executives,
who were either fired or left the company over the span of 10
months. Ex-employees claimed Rent the Runway’s company
culture was generally hostile and its management team
disorganized. Hyman denied the
characterization.

Rent the Runway also
struggled with the launch of its Unlimited subscription
service, which came
out in beta in 2014, shuffling through dozens of iterations
before getting it right. The service charges customers $139 per
month — or about $1,700 annually — and since exiting beta
and opening widely on March 24th, it has accounted for 20 percent
of the company's revenue, which is reportedly on track to
exceed $100 million this year.